Greenspan Says China Currency Mistakenly Used to Boost Jobs

Former Federal Reserve Chairman Alan Greenspan said China and the U.S. are both making the same
mistake when it comes to their government’s trade policies:
trying to create more jobs.

“You can have everybody in the workforce employed if half
the workforce is digging a hole and the other half is filling it
in,” Greenspan said at a luncheon at the Aspen Institute in
Washington today. “But trade policy has always been about
creating productive jobs.”

The U.S., with its reluctance to enact new free-trade
agreements, and China, by “basically manipulating its
currency,” are mistakenly trying to increase the number of
jobs, he said.

Greenspan directed his commentary at U.S. Trade
Representative Ron Kirk, saying his pledge to put Americans back
to work is a misplaced goal. Kirk, who also spoke at the event,
countered that it’s a political necessity to use his office to
boost American hiring, especially with the unemployment rate at
more than 9 percent.

After the luncheon, Greenspan said, “What they are doing
is the definition of currency manipulation.”

That remark by Greenspan may provide fodder for lawmakers
in the House of Representatives and Senate who are again ramping
up pressure for legislation that would let companies petition
higher duties on imports to compensate for a weak Chinese yuan.

In its twice-yearly reports to Congress, the U.S. Treasury
Department has refrained from labeling China a currency
manipulator.

Yuan Rises

The yuan rose to a 17-year high after the National Business
Daily newspaper said there is speculation China will announce a
“relatively important” currency policy on June 19, the
anniversary of the scrapping of a two-year peg.

The yuan completed a weekly advance after the People’s Bank
of China set the yuan’s reference rate 0.13 percent stronger to
a record 6.4716 per dollar today. The yuan gained 0.09 percent
this week.

Lawmakers such as House Minority Leader Nancy Pelosi say
that appreciation hasn’t been fast enough, and that they will
try to force a vote on a measure to allow greater tariffs.

Kirk tried today to damp discussion of China’s currency.

“There is a risk in thinking that if we could just get
China to address its currency, everything will be OK,” he said.
“When you look at the breadth of what they are doing on
indigenous innovation, you say ’whoa.’”

Those measures to restrict investment and boost domestic
technology in China could have greater impact on the
competitiveness of American companies, he said.